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tv   Markets Now  FOX Business  February 27, 2013 11:00am-1:00pm EST

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congress. we're considering it very carefully. i would say that the idea that qrm should be as broad or nearly as broad as qm is very much on the table. and we appreciate the concerns of congress that these criteria should not be too -- so constraining as to prevent credit worthy borrowers from obtaining a mortgage. >> but right now you have lenders keeping capital out of the marketplace because they don't know what's going to happen. we need to be proactive in getting some form of a message out as to what the situation will be because it is really creating havoc in the industry, my opinion, do you agree with that? >> the uncertainty is certainly a problem. it's one of the reasons why we haven't seen a resurgence of the private label mbs market, but again, now that qm is done, the agencies can work quickly to finalize the qrm rule. >> okay. another concern i have is bank capital standards are one issue.
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insurance companies are completely different. u.s. insurance companies hold about 5 trillion dollars in assets today. in the fed's proposed rule on capital standards, the rule is by bank regulators which makes sense for banks but they also apply to insurance companies. and insurance and banking are very different as i know you agree. strong capital standards, they are important. but they must be appropriate for a business model they apply to. will the fed perform a study specific to insurance before you finalize rules like you do for banks? >> we are discussing the feasibility of such a study. we recognize that there are important differences between banks and insurance companies. at the same time, of course, we have statutory constraints, the collins amendment, for example, that say a certain amount of capital is necessary, but we've also heard from congress about this insurance banking distinction, and we're looking at it very seriously. we have been consulting i should say with the state insurance
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regulators work the federal insurance office, with the industry, with a lot of other stake holders to make sure we understand these issues. >> there's a tremendous amount of havoc in that industry today because of what they don't know. and again i think some action is pretty necessary in the immediate rather than the long-term. would you not agree? >> well, certainly we want to get these rules out as quickly as possible. on the other hand, as you point out, we need to make sure they are appropriately set for the insurance business model and that will take some time to study and understand. >> okay. the last question you might not have time to answer, but you announced the qe 3 last september. you said you'd keep buying assets until they were substantially improvement in the labor market. i think you addressed that earlier. you said the mortgage backed security purchases will boost the economy by driving down long-term interest rates but looking at the impact of qe 3 has had on the mortgage market rates, historically at levels
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right now i'm not seeing a change but maybe that's what the intent was. but the fed's balance sheet like i said had 3 trillion dollars of holdings. do you think that the mortgage interest rates are where they should be to meet the objectives of qe 3 and do you -- or do you think they need to be lower? enough that they are providing a lot of assistance, a lot of help to homeowners. the -- the low mortgage rates are a product, not just of our latest program, but previous programs and short term rates and the leek. one of the paradoxes is that the best way to get interest rates up is to have low interest rates because that promotes a stronger growing economy, and that causes interest rates to rise. in some ways, the fact interest rates went up, happening on the real, not the inflation side, is indicative of a stronger economy, again, suggesting this is having benefit. >> the time of the gentleman has expired. the chair recognizes the gentle
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daily from new york for five minutes. >> thank you, chairman bernanke, i believe the country owes you a debt of gratitude. thank you for the leadership in the worst recession of my lifetime. you took unprecedented measures that took our economy that was in a total free fall, and we're now on the road to recovery. however, i'm deeply concerned about housing, and as we all know, the housing market in the foreclosure crisis comets to be a major impediment to our economic growth, some economists have estimated that housing and its related industries are 25% of the economy so until we get this straight, we're not going to really fully and strongly recover, and that's why i want to spend my time this morning asking you about the federal reserve's role in the independent foreclosure review
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process. as you may know, i've written you and the occ three letters over the past two month, and i'd like permission, if i could, mr chairman, to place them in the record. >> without objection. >> and i know the deadline i gave your office was march 1st, but since we're just 48 hours away from that, i thought i'd take this opportunity to get clarity. first of all, how is it that in the past 18 months, over 1.5 billion has been given the independent consultants, but absolutely nothing has been given to the up to 4 million injured homeowners, some of whom lost their homes unjustly during this 18-month review process? we have 9.3 billion dollars in aid that is not helping any disstressed homeowners. i have been told by parties involved in the process that there was an agreement between
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all the institutions that no aid would be given to help injured homeowners until all the institutions were ready and able to make payments so, first, who gave the order that no one would be paid to borrowers, to the people that were injured while at the same time nearly two billion was generated in fees to private contractors? >> well, we agreed with you that that plan was not working. as you know, the way it was set up was that the private consultants would evaluate the files, and determine how much damages were warranted. they had not made progress, frankly, and it was a very expensive cost per file evaluated, and we were op a track, and, you know, we take responsibility for this. we were on a track where the money going to the consultants
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would be some multiple of the money going to the borrowers. we have, as you know, we've changed the process to a much quicker, more streamlined process which is going to cut out the consultants which will have checks going out to borrowers very, very shortly, within weeks. >> it would be effective to compensate borrowers whose harm was found and documented rather than wait for the entire process to be completed or to make this adjustment at midterm, and we put a person on the moon, why can't we solve this? this foreclosure process is dragging down the housing industry because no one knows what to do, if we send out checks in the -- soon, which i'm
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glad to hear, how did you make the determination of who should receive these checks, where are they going, what was the criteria, and what are you going to do to clean up this backlog and take this whole problem off and help the homeowners, which was the intention of the settlement to begin with, yet, two years later, no one's been helped? >> you're absolutely right. >> i can't tell you the stories i've heard of people who lost their homes, and no one even knows who owns their home. it's just that they are vacant. we got to get this straightened out. can you just give me some time frame in how we fix this? >> yes. we have agreements with most of the servicers which will be made public shortly because they are being incorporated into the enforcement orders under which they are operating. as you know, we have about a $9 billion agreement, all of which will be reflected either in cash payments or mortgage relief to
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borrowers, none going to consultants. that is very much underway. my guess as to why payments have not occurred until now is because it was a slow, ungamely process. i'll get you information on that. on criteria, we need shortcuts because we don't have a full analysis. >> the time of the gentle lady has expired. the chair now recognizes the chairman ameritus, the gentleman from alabama for five minutes. thank>> thank you. ben bernanke, i ask you to consider rule 55 as it relates to foreign banks organizations who don't have a u.s. bank, but only have a u.s. only operate a broker dealer. let me give you four reasons. i don't want to engage you in a debate at this time, but number
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one, to have that approach is different from any other regulatory -- regulatory regime that would apply to u.s. broker dealers of our american companies so you're using a different approach. they don't have to, you know, their broker dealer doesn't have to be placed in that. second, it's discriminatory, in my mind, because the securities broker dealer of the foreign banking organization could have a higher capital standard because of the standard imposed on the intermediate bank holding company. we also have the long standing principle of, i guess, national
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treatment where you don't have desperate treatment, and i think this -- there's a capital requirements of the functionally regulated subsidiary of a bank holding company such as a broker dealer subsidy whose capital requirements are established by the fdc, so, to me, that violates that. now, i'd tell you to look at section 165b3 of dodd-frank which says that in prescribing standards, the fed should also take into account, and i'll quote, the feds should also take into account whether a foreign bank owns an insured bank as well as whether it has another primary regulator, so i would ask -- i'm -- i would think that
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you consulted with the fcc and the foreign regulators. i gist got back from germany, and this was brought up on three different occasions by both government officials and european banks as to why are you treating us differently? i know you've extended the rule -- the community period to april 20th, but i would like to just exchange a series of letters and point out this in more detail. >> thank you for calling this to my attention. >> thank you. and it is -- there's over a hundred foreign banks operating here that could be under a different capital requirement than our local banks, and i think that could cause problems with our international regulators, and i'm sure you heard from come of them. let me say to the membership, both republicans and democrats, and, particularly, those who come here just in the past five
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years. chairman ben bernanke told us today exactly what he told us for the last five years, and that, he told us to focus on long term structural changes to our mandatory spending program. most of which entitlements. that ought to be the focus. he said that today, and he said that it will have a beneficial effect, a long term beneficial effect. it will not retard economic recovery. now, what have we done as opposed to what he's -- and i've asked that same question to you for five years, and you've always responded, focus on long term structural changes, because the demographics. what have we done? last year, we had some success. this congress does not get benefit of we had $2.5 trillion worth of cuts and revenue measures that reduce our debt for the next ten years 2.5
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trillion, and most people are saying we got another trillion, 1.5 trillion to go. i will say this. i know you're hand is on the clock. we could -- and let me say this, this was a -- sequestering was a bipartisan mistake by members of both parties. we were told it would not go into effect. that's a gamble we'll lose on march 1st. what we need to do is substitute short term changes for going up on the retirement age two months or means testing. this is not rocket science. i say to the president and this congress, quit fiddling around, get to work, let's come up with $85 trillion worth of long term structural changes. >> the time of the gentleman has ebbs pyred. the chair now recognizes the gentle lady from new york for five minutes. >> thank you, mr. chairman.
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thank you, mr. ben bernanke, chairman bernanke, help me out. did you state why nor testimony that we need to make structural changes to entitlement programs, or did you say that front loaded spending cuts require, but policies that reduce the federal deficit more gradually in the "new york times" but more substantially in the longer term? >> yes, i said, congresswoman, i said that you need to look at the long run. >> okay. >> which is where the problems are most serious. >> mr. chairman, it's been stated that the housing sector has continued to see improvements with increased construction activity and higher home prices. as you know, the rate of economic recovery relies heavily on a robust housing market, and
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i'm interested in hearing from you what will be the effect to the economy if fannie mae, freddy mack, and the fha were scaled back or abolished as some policymakers have proposed? >> well, currently, fannie, freddie, and fha, the whole mortgage market. there's not much other than portfolio lending by banks, there's not much in the way of alternative securitization so shutting them down without doing anything else would no doubt restrict credit quite considerably. >> job creation? >> yes. i think we all agree that over the longer run, we have to come to a more acceptable set of institutions, but right now, of course, they are providing most of the support for the mortgage market. >> thank you. mr. chairman, it rations of the basal rule allowed exemptions for community banks from the complex capital rules imposed on
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large multinational banks. what -- was that approach considered for this round of basal? >> i'm not sure i quite understood. the -- >> basal1 and 2, small banks, community banks were exempted from those rules. now in basal 3, they were not. the one that created the economy -- >> the community banks have always been subject to capital rules, of course,. they are exempt from many, many more of the complex rules that have banks that continue to be the case, and i'm sure you're eluding to the concerns that small banks raised about the proposed rule, and we've heard from both sides of the aisle as well as the industry and other stake holders and we are looking at that carefully. >> i'm concerned about that because when we look at the survey of nonofficers, it still
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shows that access to capital for small business continued to hinter economic growth, and community banks are the ones that lend to small businesses, and i am concerned to know whether or not someone was advocating for community banks when it comes to imposing regulation on basal three. >> we're looking carefully both at community banks and small business lending and recognize the importance of those two institutions. >> thank you. >> does the lady yield back her time? lady yields back her time. now the chairman of the financial institution's cube committee, the lady from west virginia. >> thank you. >> recognized for five minutes. >> thank you, mr. chairman. thank you, mr. chairman, for being with us today. i want to voice my concern to the previous questioner on the issue of the basal three and effect it's having on and could
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have on community banks. we had a hearing several months ago, and it was unanimous in the hearings from all voices that there is a serious concern on what impacts this could have on lending for small businesses and the ability, really, for community banks to survive and flourish, and so i know you've already answered that question, so i appreciate the fact that you're keeping that in mind as we move forward on the regulatory issue. you know, you talked about the sequester and talked about, perhaps, you would prefer it to go in a more garage wall -- gradual pace more than the dramatic pace it could be going at this point because the influence of jobs. well, i've got a great idea. i live in an energy state. if we would unleash the power of this country to really have a full and flourishing energy economy, both including in my state, cole and natural gas, but keystone pipeline and others, we would have thousands of people,
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more people working. we would have energy independence, availability of natural gas as transportation fuel, fuels the chemical industry, and the power generation. i'd like from your perspective, and i'm very frustrated by the regulatory issues and the -- i think, the inability of the administration to move forward in a full out energy independent policies i think could create many, many jobs. where do you see energy as the part of the whole national economy, energy independence, and the job effects that an energy economy can bring in >> well, energy io's -- well, energy's a bright spot in the economy. it's increase in natural gas, oil production, talks of coming close to energy independence in the next few years. that's created a lot of jobs and been a positive pack --
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factor in many parts of our country. of course, there are always environmental issues that arise, and, frankly, i'm not qualified to give you a sense of how those balance out already. i hope solutions are found that prereceiver the environment and also allow for the development of the resources because, as you say, it creates jobs and reduces our vulnerability to foreign energy sources. >> you mentioned gas prices as a reason that's hurting our economy in general and, certainly, all of our constituents are feeling this very much. i think an energy economy, there, again, could answer in a small way and maybe a large way, the issue of gasoline as we move towards energy independence, so, you know, i would like to hear you talk about the energy economy more as part of our broader economy because i think it -- you said it's a bright spot. let's feature it as a way for us
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to pull ourselves out of a slower recovery. i would encourage you to do that. my other question is on seniors. many of us are in the sandwich generation trying to help our parents, and our parents are doing a good job trying to help themselves, but they are relying on their planning and investments if they are lucky enough to invest, and the dividend and interest availabilities to them are crushing seniors as they see their health care costs go up, and some of the policies that you put forward, i think, and that the fed has caused concern for those of us who are concerned about seniors who don't have the ability to get a job. what can i tell the seniors back home that is going to give them some optimism they will be able to rely on the good planning they had to carry them through the senior years?
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>> well, first, savers have many hats. they hold bonds, but they also may own stocks or a house or a business. all of the other assets benefit when the economy strength pes, -- strengthens, and those values went up, the stock market doubled roughly, as you know, in the last two years. there are alternatives. i think more importantly, though, you're not going to get strong returns in an economy that is fundment tally weak. the best way to get sustainable high returns to savers is to get the economy back to running on all cylinders. >> uh-huh. >> it's somewhat paradoxical, but some ways the best way to get interest rates up is not raising them too quickly. by keeps rates low now, we help the economy get stronger, create jobs, and get momentum in the economy, the way to get a sustainable, higher stet of
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interests rates. it's striking if you look at every other industrial country in the world, interest rates are what they are here. that says something abouted fundamentals which are weak in the industrial countries, and until we have greater forward momentum, we're not going to see higher returns. >> thank you very much. >> the lady's time expired. the gentleman, mr. sherman, is recognized for five minutes. >> thank you. i appreciate your recognition, fortitude to stay can it, and creativity to go beyond your traditional tools in carrying out the policy. listen carefully to my california republican colleaguesment i want to associate myself with mr. miller and his comments about a qrm definition that is not too far from the qm definition. i heard mr. campbell criticize
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the fed because he hears people saying that you shouldn't fight the fed, and it's hard to price risk. i'm pretty old. i've seen your predecessors carry out just about every kind of fed policy i can imagine, and everybody's always muttering, "don't fight the fed," and the only time it's easy to price risk is when they are wrong. the mutterings that the gentleman from california hears are not just consistent with your monetary policy, but every other monetary policy that you could imagine. it was pointed out how important fannie and freddie are and fha. we heard testimony from moody's analytics that if fha had not been there, we would have seen another 25% decline in home prices. this, in my view, if that had happened, america would look
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somewhere between greece and thunder dome, so it's fortunate that we have those institutions. we've got a lot of capital on the sidelines as the gentleman from california pointed out. investment needs funds, but it also needs people willing to take a risk. some criticize that as reaching for yields, but if everybody is only willing to invest in investments where the appropriate yield is 2% or 33%, -- 3%, we're not going to have small business lender. i never saw a small business with a 98% chance of success. we have banks out there. they got a lot of capital. they face a lot of pressure to invest 2 #% and 3% and 4%. i'm told by bankers if they invest in something with an 8% likelihood of default, they don't face an 8% reserve or a 10% reserve or a 12% reserve. they get 100% charge to capital.
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what can the fed do so that loans that are a bit, you know, they are not just the 2% or 3% lows, are valued conservatively and the portfolio is valued con -- conservatively, but not with a penalty evaluation. >> i want to continue that discussion with you. the reserving practices are mostly tied to actual problems with loans, not with loans that are made, may be risky, you know, and, in fact, one of the issues that has been an issue for awhile is can banks put aside reserves against general losses opposed to losses in specific loans, so we have generally been supportive, actually of banks doing more reserving to have some reserves available against losses not yet seen or understood, but i think
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maybe we need to have a further conversation on this. >> i look forward to that. timing is everything in a lot of fields. it's an ideological city right now. an ideolog either believes it is always the right time to cut taxes, always the right time to cut spending, or always the right time to increase spending or always the right time to increase taxes or always the right time to do whatever their ideology requires. in your opening statement, you point out that our -- the fed is adopting a different approach. you actually have different policies for different business conditions and would have a -- your line is 6.5% unemployment along with some other factors. the national debt is a growing cancer, but this is an economy that is still dpsh that suffered
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a heart attack in 2008, and you don't administer chemotherapy while the patient is still in the cardiac icu. would the markets have confidence in congress, and it's hard to think of whether they would ever have confidence in congress, if we had statutory provisions which, like your policies, had a trigger and moved towards a more contractionary fiscal policy with this 6.5% unemployment rate. >> the time of the gentleman is expired, and the chairman can answer the question in writing. the chair now recognizes the gentleman from new jersey, mr. gaiter for five minutes. >> i thank the chairman, and i thank the chairman. i want to talk about remittances, positive results, and if we have time, the effects of the somewhat current loose
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monetary policy. on remittances, you said they are here, but potentially to go down in the future. if you look at the consolidated balance sheet of the federal reserve, we have capital of less than 55 billion, assets more than 3 trillion so that means that all you need is about a one quarter of 1% increase in interest rates, and you basically wipe out the -- what you basically have now, a 55-to-1 ratio, and you wipe that out. what is your prediction, actually, on that going forward with regard to interest rates, wiping that ratio out, and the effect on remittances to congress? can you be more specific on the numbers? >> certainly. so, currently, as i said, in the last four years, remitted $290 billion. we have more than $200 billion in unrealized capital gains on the balance sheet. the capital issue is ire relevant. we have additional funding behind the capital. we have a -- a -- we have $3
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trillion in liabilities, not callable liabilities like cash, for example -- >> i guess i would ask you if you could follow-up on detail on that. that's not the way i understand it, but i would ask you to put that in writing. >> the main reality here is that if interest rates rise very quickly, then there may be a period where we don't pay remittances at all to the treasure think. -- try ri. that's the outcome that's important. in all scenarios, we submit remittances to the treasury substantially higher than the norms before the crisis. >> since time is limited, we're looking at around $90 billion roughly in remittances, and we can eliminate it, and we're sequestering at $85 billion, putting it in perspective as to what the effect could be as far as your policies there. with regard to the positive indications that you indicated, you said the stock market and the housing market have gone up because of your monetary policy,
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but, previously, you said the feds' mop tear actions earlier in the decade, 2003 and 2005 did not contribute to the housing bubble in the u.s.? is monetary policy by the fed not a cause of inflation prices of housing as you said in the house, or is it a cause of inflating prices of housing? can you have if both ways? >> yes. >> you can? >> yes, they >> yes. you can have it both ways because they're different phenomena. the mortgage rates, it is a quantitative thing. house prices are going up a reasonable amount given the strength and of the housing market and the economy, given where mortgage rates are. the amount of movement in mortgage rates, mortgage rate in the early part of the decade were 6%. that can't explain why house prices rose as much as they did. maybe it was a small contribution but can't explain the big run-up. >> the other area indicated, your policies are working in a cost-benefit analysis, the stock
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market. i am sure you are familiar with milton friedman's work that says people only consume off of their permanent income which basically means you don't consume increased consumption because your stocks have gone up in the marketplace. to that point, what seniors should do in this indication is taken out of some kick back and put it into the stock market. heaven forbid my 90-year-old mother would take her money out of fixed markets and put it in the stock market. that is probably the worst advice out there. when you consider the 1% increase in the stock market only has made the 100% increase of gdp i don't understand how you can give advice or how you can suggest the increase in the stock market is a positive indicator of your work in a cost-benefit analysis to the rest of the economy. >> hamas not giving financial advice. i apologize if i gave that impression. >> what should you be doing
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independent for the seniors? >> i was saying the economy will get stronger because of good policies and that in turn will cause rates to rise in a sustainable way. if we were to raise rates prematurely, and come down and we would have a long-term situation with low rates. >> wouldn't you have provided the certainty of more price transparency? earlier you said some risk-taking in the market is appropriate. that was one of your opening comments. risk-taking is appropriate but opprobrium when there's price discovery. when you have a market that is distorted as they are right now by the fed's monetary policy, you don't have true price discovery. when you do risktaking now, based on not knowing what they are doing, so risk-taking now is worse than risk-taking it is when the fed's action do not
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disturb the market place. >> we recognize mr. meeks for five minutes. >> want to thank you for your hard work and with reference to our great country. in your opening statement you talked a lot and indicated about jobs, the subject matter, everyone is considering jobs on both sides and the creation of jobs. yet we have had 35 straight months of private sector job growth, but we continue to have and stubbornly high unemployment rates. as i look at it with the steady growth, we have shed over 600,000 public sector jobs since the beginning of the financial crisis in late 2008.
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in fact the wall street journal estimated last year that the unemployment rate would be at least 1% lower if we had those jobs, those 600,000 jobs. my question to you is what strains have these massive public sector layoffs put on your ability to stabilize the employment sector? and what do you think we need to do in regard to that replace those jobs? >> let me first say i understand why states and localities laid off a lot of workers because their tax revenues went down and they had to balance their budgets and was the only option they had but it is true that state and local governments, their retrenchment during the recovery and their layoffs were head wind for the broader economic recovery and the fiscal retrenchment at the state and local level has been more severe
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than in virtually any other recovery. the good news i guess, one of the reasons we may have a stronger economy going forward is state and local governments seem to have stabilized their budgets and as a result we don't expect to see those ongoing layoffs to the extent we have seen them in the past but it is true that the contraction of state and local government budgets together with more recent cuts in the federal budget has resulted in job loss certainly in those sectors and in the economy more broadly. >> and sequestration as we see it right now on the federal level could exacerbate that? >> i cited a congressional budget office which has reasonable estimates, yes. >> let me also go to a question because you have been asked about banks and bank lending and alan blinder had an op-ed at the
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wall street journal last year of 5 recall pointing out that in an effort to spur lending by banks central banks in europe are cutting their interest, cutting the interest they pay on excess reserves to zero. the danish put it to-2%, they have to pay to keep reserves with them. this seems to me to be a powerful incentive to either land or put money to work in the markets. so my question is do you believe that this policy is implemented here would benefit the u.s. economy and if not why not? >> banks are currently being paid on the reserve's 25 basis points, 1/4%. they are receiving less than that because they pay fdic premiums on the deposits that they hold on the other side of the balance sheet so they are put in receiving a few basis points on their reserves.
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if we cut interest on reserves to zero or slightly negative which is possible, it would have a very small effect in the right direction, very small effect on the incentives of banks to make loans. basically they are not finding as many loans as they like to make when they're earning eight basis points and help to get down to zero. it is in the right direction as i said about one of the reasons we hesitated to do that is it would also lower returns throughout the money markets in our economy and would create some problems in terms of functioning money markets, a federal fund market and other short-term cash markets. is not clear the benefits in terms of more stimulus outweigh the cost in terms of market functioning. that being said it is always something we have kept on the table and talked about periodically. >> something you're still talking about because i like
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movement in the right direction. it is not a powerful tool in any sense. i would like to get my next question in. my next question is what you were told -- [talking over each other] >> a time of the gentleman has expired. the chair recognizes the gentleman from texas for five minutes. >> thank you, mr. chairman and ben bernanke, mr. chairman, i want to walk through the proposed exit strategy that i think was put forward in june of 2011 and see if you foresee taking different steps and i believe in that exit strategy, you said you would cease reinventing payments of principles, principles on securities holdings as they matured. the second part was raising fed funds while adjusting the excess reserves and levels of reserves in the banking system to kind of
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bring those funds towards a target rate. the third part of that was selling of the fed securities and for the first increase in the target for the federal funds rate. so according to the most recent fomc minutes released a number of participants discuss a possibility of providing monetary accommodation by holding securities for a longer period of time than was originally envisioned by the committee's exit principles either to supplement or replace for other asset purchases. this suggests a deviation from the coarse put forward in 2011 and i would suspect there may be other changes that are being discussed from the june 20th exit strategy as well. based on you laid out this exit strategy and based on these subsequent conversations and discussions that are going on.
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how confidential investors' and the business community be that this exit strategy will be the same six months from now or three years from now and given the huge size of your balance sheet and the potential uncertainty that changes this exit strategy could cause, are you concerned that we are creating additional uncertainty in an already uncertain economy? >> i don't think so. we haven't done a new review of the exit strategy yet. i think we will have to do that sometime soon. the basic outline you just described, i am pretty confident would still be in force. the one thing we could do differently as you point out is hold some securities longer, we could even lead the unjust runoff. i want to be clear, even if we don't sell any security doesn't mean our balance sheet is going
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to be large for many years, just an extra year. that is all it would take to get back to a more normal size. that is one issue, how long to hold the securities and whether to use that as a substitute, an alternative to asset purchases. that is something worth discussing, but i don't see any radical shift in the way this is going to happen and again conlan as i said earlier, we are quite comfortable that we can exit in a way that is both smooth and in which we provide lots of information to markets in advance to know what is coming and be able to anticipate it. >> kind of interesting when you said we need to take a slower approach to deficit reduction and that the economy couldn't withstand major reduction in government spending, don't you find that a little disconcerting, that we have let of the government become so much
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of the economy that cutting our deficit so that we don't mortgage the future of our children and grandchildren should be a consideration in deficit reduction? >> government is an important part of every advanced economy now and i am not by any means as i said i am not by any means saying that we should not deal with the deficit problem. just saying we should take a longer-term perspective. >> one of these things, people say fiscal policy and monetary policy and you say i am in charge of monetary policy, not fiscal policy, i almost find the fed to be a deficit and a mother in the environment we are in right now and the reason i say that is the fact that last year i think you transferred $90 billion back to put treasury so basically whatever securities
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you basically by down their yield to basically almost zero, so you put $90 billion additional money in the hands of the government, yet we still ran a $1.2 trillion deficit. we are almost enabling the government to continue to pend because we are allowing them to have this borrowing habit at a very cheap price because of the actions you are taking at the fed to buy those yields down. >> the time of the gentleman has -- >> you can follow up. >> if you could follow up, please. the gentleman from massachusetts is recognized for five minutes. >> thank you for being here. mr. chairman, i read most of the 57 page report, 59 pages and any time any fed chairman has ever come before us i get a headache before, during and after. i love you dearly but trying to parse all these things everybody
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is saying is very difficult for average people including me. i want to read one sentence from your testimony to make sure i understand correctly and this is from your testimony. to address the long-term issues the congress and the administration should consider replacing the shop from bloated spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near-term, more substantially in the longer run. i think i read this correctly but would it be fair to me to paraphrase this to average people that the chairman of the federal reserve thinks that sequestration is stupid? >> i wish you wouldn't do that. >> would it be fair? >> what i am saying is by a more gradual approach but with more cuts in the long term, achieves both objectives. not slowing the recovery by too much but on the other hand
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addressing longer-term issues. >> i am getting a headache again. from what i heard you just say again to paraphrase, not to gloat, you think sequestration is stupid. i agree with you, it is okay. sequestration is going to get its fair share of attention today and this week and next week but i want to focus on something that is more closely related directly to what the fed does and that is too big to fail, i was reading your testimony yesterday from the written testimony and i want to read your words as reported relative to too big to fail on the subsidy relative to too big to fail and you say the subsidy is coming because of market expectations the government would bailout these firms if they fail, period. those expectations are incorrect. that is a quote from you. >> yes. >> am i reading this correctly? do you believe that least through legislative purchases, big to fail is non existent
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anymore? not true of the market but to the law. >> we don't have the tools that use in 2008 are gone now. will we have instead is the liquidation authority which among other things would wipe out all the shareholders of the company being liquidated. if we had a systemically large and important firm to failed tomorrow it still would be could be very damaging to our economy. >> but the law currently as drafted after dodd-frank and all the things we have been through today we don't have the tools we use to implement too big to fail. >> the tools the federal reserve use the no longer available. >> glad to hear that. i agree with you that regardless of what the law says somebody in the marketplace especially my friends on the other side of the aisle like to believe it is still in existence and i accept that not as the legal point but as a fact of reality. some people think that the moon
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is made of cheese and that is fine. to them that israel. some people too big to fail, there is no scientific or legal proof that it is. what i am asking is to -- what do you suggest we do to address that misconception of the market and the misconception of some of my own colleagues that too big to fail is still here? i think we all agree that we don't want it to be here, it is not here, how do we address that misconception to make a reality? >> dodd-frank has a strategy that involves making big institutions in turn allies, take account of their systemic cost by tougher regulation, higher capital charges and so on, the order liquidation authority and strengthening the entire system. there are steps we're taking that are moving in that direction. i think the markets will come to see that these steps are effective. we can communicate it, we can say it.
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>> i have been saying it views and some refuse to believe it. do you accept the general, again, not to the dollar but some studies that put subsidies that the alleged subsidy that is there for the too big to fail that doesn't exist anywhere but the market perception -- >> i'm sure -- >> i said that. >> we need to be working, it is declining but we need to work on eliminating it entirely. >> do you think that subsidy can be quantified in a reasonable way? >> with lots of assumptions and so on you can compare what large banks pay to what small banks pay and it gives you some sense. >> be prepared to that request for me to do that quantification. >> senator warren cited studies to me yesterday. >> that is not your study. i want yours. >> the time of the gentleman has expired. the chair recognizes the gentleman from north carolina, mr. mchenry. >> thank you, mr. chairman.
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thank you for your service to our government, to our people. to follow-up on my colleague from texas's question about fed policy, masking the true cost of our fiscal profligacy. the question is with the fed buying 40% of u.s.-for f y 2013, with negative real interest rate, isn't the fed the great and a boiler. congress and the president make fiscal policy, in essence masking the true cost of the debt? >> if i could make three points. the first is as a share of all the debt outstanding, the fed's ownership is lowered today that was before the crisis. we own 15%, 16% of all the debt
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outstanding so the interest rate comes from actual market trading between private sector individuals. second-i emphasized today there's a very long-term problem here. what is going to matter is the interest rate not today but the interest-rate five years from now, 15 years from now. congress i hope has the foresight to see interest rates won't be this low forever and they should take that into account and finally i ask what is the alternative? if we raise interest rates substantially to make it harder for congress to borrow, at the same time we do damage to the economy and lower revenues and make the deficit worse i don't see that is helpful to our fiscal situation so my hope is congress will recognize interest rates will rise over time as our economy recovers and this is a long-term proposition and they should take that into account in their decisions. >> so in the short run yes. >> no. again we only have 15%, 17% of
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the total debt outstanding. it is not the case that we are buying all the debt being -- >> 48% of the new debt but not on average. 85% is circulating in private hands. to go to a separate point. the bloomberg report that your recent meeting of the treasury barring advisory committee which is a group of senior bankers and investors received a presentation that warned the central bank policies and i am quoting from bloomberg news, the central-bank's policies may be inflating bubbles aspic degrades, bonds and other asset classes. is this an acceptable side effect of the fed's expansionary policy? >> it is a cost of these policies and one that we take very seriously. we look at these -- these possible miss pricings and we ask ourselves are they in fact
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miss pricings, and if they are, what is the vulnerability? for example, if an asset is miss price is it purchased using a lot of leverage? who is owning it? with the change in its price severely endanger our financial institutions? we are examining this with a great deal of care. again i ask what the alternative is. interest rates are low for a good reason. if in fact we have come to the conclusion that the cost of these miss pricings are sufficient need to take that into account. >> to this point about inflation many of us have this concern about how you are going to unwind this unprecedented portfolio that you preside over or how your successor will unwind this or your successor's successor. the concern that we have is that you could only see inflation
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with hindsight. the question i have to you is with a record of the 1970s where in 1973 inflation was 3.75%, market expectation, the fed said 3.9, the actual was 6.2, 1974 expected inflation was predicted 6.7%, the fed said 8%, the actual inflation was 11. 1979, expected was 8.3, fed said seven.75, actual is 11.3%. 1980 expect inflation was predicted at 11%, the fed said 7.5 but the actual was 13.5%. the fed has consistently gone negron. are your tools better now to see inflation than they were then when we had this great period of inflation? >> our tools are better but the environment is much better because we now have 25 years of success in keeping inflation low not just the united states but
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around the world, inflation expectations are very well anchored and wages are very growing very slowly. >> the time of the gentleman has expired, the chair recognizes the gentleman from georgia, mr. scott, for five minute. >> thank you. how are you? good to have you again. i want to commend you for the very courageous and bold work that you have done, and the aggressive quantitative easing in which you have moved very forthrightly to strengthen the economy for the purchasing of treasury, i want to commend you for that. but i have always known you to be a straight shooter. i have great respect for you. we are on the eve of a very dramatic moment in american history dealing with this
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sequestration and the president of the united states has said it is a terrible thing to do, the democrats have said it is a terrible thing to do, we are fighting to avoid it, the secretary of defense came before us and said it is running our national security, better not do it. we have had our transportation secretary, lance security secretary come before, but republicans are saying, who are determined to move ahead and say let's do it. i want you to tell us today who is right here? who is telling the truth here? is sequestrations something that we should not do? as democrats feel or something we should do, as republicans feel? what is in the best interest of america? >> you are asking me to make decisions which are not mine to make. the the congressional decisions, congress has to make those decisions. i am advising a more gradual approach. i am not saying we should ignore
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the deficit, not saying we shouldn't deal with long-term fiscal issues, but from the perspective of the economy more gradual approach would be constructive. >> when you say gradual, what specifically would gradual mean? give us an example. >> it works in the same direction. more gradual this is as long as it is offsetting changes on a further horizon, the less the immediate impact will be on jobs and growth in this recovery in 2013. >> do you agree that that gradual approach contained both spending cuts and additional revenue? >> that again comes back to what congress is responsible for. i am not going to comment on that. >> i am very concerned about this because my home state of georgia will suffer tremendously
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on this. i represent a district that has lockheed martin for example. who has already come under tremendous job loss pressure. we are looking at over 60,000 jobs immediately. we are looking at those jobs are teachers being laid off, firefighters being laid off, critical, critical manpower that is needed. let me ask you, friday comes, we go over the cliff with sequestration, what should we do next? should we then try to consistently moved to put something in place? and how would you advise us to do that? and what would that step and tail? >> again, the specifics are up to you. what i would suggest would be replacing the sequester with something smaller, takes hold
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more slowly but is compensated for by changes on the horizon. >> do you see a complicating factor -- >> i am dennis kneale. tracy: i'm tracy byrnes. let's go right to capitol hill and peter barnes who is inside as ben bernanke gave his testimony today. peter: that is right. the fed chairman once again defending his policies but also getting hit again with questions about too big to fail again from the massachusetts delegation in congress. michael capuano went after him and too big to fail. leader yesterday in the senate banking committee from elizabeth warren, the new senator from massachusetts on the same issue. let's hear that today. >> would it be fair for me to
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paraphrases to average people that the chairman of the federal reserve thinks that sequestration is stupid? >> i wish you wouldn't do that. what i am saying -- >> or would it be fair? >> what i am saying is by a more gradual approach but with more cuts in the longer-term, achieves both objectives, not slowing recovery by too much put on the other hand addressing the long-term issues. again, to paraphrase, not to quote, you think sequestering is stupid. i agree with you, don't worry, it's okay. >> well, that was actually on the dominant topic at today's hearing. the sequestering spending cuts that start friday, and fed chairman ben bernanke urges some kind of a fix here to blueprint those, to make -- lessen the impact of those, how you said that yesterday in the senate and also today here in the house. tray di and dennis, back to you.
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dennis: thanks, peter. if it's stupid, why did both parties agree to it? tracy: well, there's that. well, we'll keep you updated on ben bernanke's testimony throughout the hour. it's streaming live on as well. dennis: breaking news, the apple shareholder meeting beginning now in california, and we're all over it. adam schapiro outside the meeting, and tech interleague is here, capital managing director of equity strategies, bullish on apple stock, and one so bearish, he's shorting it personally. tracy: really? wow. first, nicole on the floor of the new york stock exchange watching apping shares now. we were just up over the 14,000 mark, nicole, and just pulled back a point. >> that's right. the 14,000 mark, talking about the major market averages is
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true, it's a psychological level, and apple, in particular, down a buck-78 at 447, and it's interesting to hear them shorting this. there's a lot of people who are a big believer in the apple products. right now, the stock down about a half a percent. certainly, a far cry from the all-time high set back in september of over $700. most of the analysts thinking moving to the upside; however, it is a stock that's really left shareholders frustrated and some vocal as well as for the cash on hand over at apple and what they intend to do with the cash. back to you. tracy: thanks, nicole. talk about apple, adam out there, what did they tell you going into the meeting? what do they want to hear? >> they picked up on what nicole talk about, $137 billion in the bank. what are you going to do with that cash? now, of course, tim cook, who has been talking about that cash stash, responded to the now infamous lawsuit that so far diffed einhorn from green light
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capital won in which apple wants to hold on to the money calling the judge's ruling disappointed and they want the cash dispersed through deferred shares or raising the dividend. we spoke to shareholders inside the meeting which just began moments ago, and they told us apple should guard the cash. this is what they said. >> in this case, the company does not need to raise capital, and from what i understand, apple really doesn't have any reason in the near future anyway to even issue preferred stock. >> not push anything on to it? >> i was there, i was an employee there for 21 years. there were several times we didn't have any money. they need to decide what to do with it as they need it. they need to hang on to it. >> there are expectations that tim will be asked, will you up the dividend? will you have at least share with us plans as to what you intended to do with the cash? that is a big question that a lot of people have, and, of course, the issue of their stock
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falling over the last 52 weeks, something like 40% from a high of 775 to a low of 432 bucks to where it's trading today. tracy? tracy: adam, we'll check in with you later in the show. i like what the cher holder said. you never know. you got to hold on to things sometimes. dennis: she's a saver. let's get to the expert panel. howard, you shorted apple somewhere around in the $600 range, maybe not on air, but too bad, you woabt cover until the price starts with a three. why is that? >> two factors here, okay? people are focused, one, on the major business. that's really where i want to focus my attention. i don't want to focus on evaluation. stocks follow estimates. they follow margins. look what happened to the company over the past six to nine months, you've begun to see significant margin pressure. at the end of the day, a great operating system to keep you in the ecosystem for all the apple
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products. the margins are going to be significantly compressed. you're at -- you're already mature in some of the major markets. now you have to go into the other markets. in the major markets, you're supported by carriers, at&t and verizon who pays apple $600 for the product, charges $200 and eats a $400 loss. in the other markets, they are not prepaid. there's prospects for growth that are limited. others have better products. dennis: the profit margins are coming down. >> well, they have. again, you know, we've had this discussion before. margins have gone down. look at why do they come down? the reason they came down is the largest apple product refresh we've seen in years. there was that. we had supply constraints that pressured margins. as we move into the coming quarters, you'll see the economies of scale build, see price pressures diminish somewhat. if you look at where management
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was on gross margins, they guide to 37.5, to 38.5% for the march quarter, very conservative. i'm not disagreeing with howard. margins go down. we disagree on the trajectory of that. they could go up in the coming year before they did down somewhat. dennis: buy on the stock except in september? >> we were. we lower allocation to new money. we've. in the stock in the hundreds, long term shareholders. this is a blip, but not panics. dennis: what does it take to sell the stock, chaning? ride it down into the 300s where howard says it's going? >> no, we don't expect it to go into the 300 range. what would concern us, new products like itv, that would be a concern. you know, where the margins could be hit. we want to see this stock do is stick with what's working and margins are going to go down. look, it's a technology cycle. this happens. it's going to go down.
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dennis: all right. go to rob, the tech guy, because, you know, they look, rob, at margins and figures on paper. you look at gadgets. is it true that apple no longer is making, clearly, the coolest, best smart phone in the world. are the competitors, samsung, gaining? >> i think you're seeing apple forced to compete with samsung, a large scale manufacturers, used to selling goods on thin margins forcing this response, driving apple's margins down, and apple is no longer driving the market. they had a small phone, everybody else goes big. the technology advancements come from the android ecosystem for the moes part, and the end result is, as a leader, apple traded as a leader, and now the market adjusts to the fact apple is not the leader and recognize that apple led by a visionary, micromanaging visionary with steve jobs. the company is still designed around that function. tim cook is not that guy.
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until the company adjusts for the executive change and the loss of staff over the last couple months, they are not coming back. dennis: okay. howard, one thing said, when everybody said apple will be fine after steve jobs. i thought how can it be worth as much money with the brilliant steve jobs gone as it was worth when he was there. in terms of stock, though, what can prop it up? there's rumors of a stock split. when a company splits, 10-for-1 like apple might, it opens the market how many people afford the stock, demand comes in, price goes up. does this hurt the short scenario? >> it doesn't change the value of the company. there's retail buying, enthusiasm, but it's not moving the needle. the real thing to change the story here is they become much more aggressive in the financial engineering. if they do this thing that david is talking about. they may make sense for apple, frankly, i think they make sense for a lot more companies. i think that's exactly what dell should be doing per se because i don't see apple as the cash cow
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because margins will be pressed, but if you want to change the real trajectory and get me to cover, you have to get the margins up otherwise estimates go down and stock is going down. dennis: how much of the $137 billion horde of cash do they need to give to shareholders? what do they need to do to please you, the short selling? >> give away all of it, generate $50 million in cash, give away all of it to change my feeling at the margins. they're not going to do that or be that aggressive. dennis: all right. tell us the biggest thing to prove howard long in his apple possess mitch. >> right. congratulations, howard, on your short. i would be concerned. one, expectations have gotten beaten down considerably. stock down 37%. analysts' estimates way down. that's the concern. secondly, howard's right. if apple would increase the dividend by 40-60%, and then it's 3.5 to 4%, you might atrack
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the valued investor not playing in apple. the growth investor went away, but if they do that, that's a big risk to howard because there could be inflows coming in from value investors to get the stock price up. that would hurt. >> there's 55 analysts to cover the stock, 40-something bullish. i don't believe the growth guys are out. dennis: rob, your tech angle, what can apple do to prove, make howard lose money here? >> well, i mean, we have the iwatch coming. we have, supposedly, an itv thing coming. if they execute with a set top box strategy and not a tv, the watch is compelling, but overshadowed by google glass. address the head mount display moving forward. showcase they can invo vat, lead the markets, and get samsung chasest chasing them. that's the only thing that brings them back. they are a premium class vendor in a mainstream market.
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they are trending to be a chevy. need the market chases them. until it's happening, they are not moving. dennis: google glass-like products and apple wristwatch, they are in trouble. the products sound silly to me. could be wrong. thank you very much for being with us. rob, howard, and channing. >> pleasure. tracy: good stuff. ben bernanke defending continuing stimulus in the heated session with the house financial services committee. we are monitoring the fed chief's testimony, and we'll bring you all the critical comments. dennis: win more sign that budget cuts will kick in at midnight tomorrow. the president scheduling a meeting with congressional leader for friday to fix it. tracy: ha! dennis: after the sequestering kicks in, and coming up, former senator kay hutchenson on why spending needs to be reign in. tracy: huh, all confusing to me. as we do every day at this time of the day, how is oil trading?
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up 50 cents a barrel, $93.16. we'll be right back. dow is over 14,000 again. ♪ the capital one cash rewards card
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>> let's go back to the ben bernanke grilling on capitol hill where congressman michele bachmann is asking about the size of the national debt. >> according to the calculation, do you think it's a problem in six years we've gone from 8.67 trillion to 16.5 trillion? >> certainly, it's a problem. that's why it's important to bring it down over time. >> you said we have to align the solution with the problem. it seems to me we have a big problem, and i'll tell you why. when i was home last week talk talking to a lot of women, they told me, i don't get this. gasoline at christmas time was $2.99 a gallon. now it's $4 a gallon. i can't keep up with the price increases at the grocery store, and we just got our health
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insurance premium, and it's going to be $300 more a month than what it was. all i have to say, mr. chairman, that -- >> time of the lady has expired 3 12k3w4r-7 that -- they have to deal with the inflation. >> the time expired. the chair now recognizes the gentleman from texas for five minutes. >> thank you, mr. chairman. chairman ben bernanke, thank you for visiting with our committee and thank you for your leadership and for your foresight in the handling of our fiscal policy. your testimony comes at a pivotal time in our nation's capitol. well, we want to address the long term health of the federal balance sheet, the sequester cuts are so drastic and so immediate that they greatly threaten economic growth. in your remarks, you suggest congress consider a longer term
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horizon for targeted fiscal changes, and i completely agree with you. the sequester is totally unnecessary and illustrated a lack of political courage by member of congress. we have spent a lot of time in this committee attempting to reduce uncertainty in the economy. we've done it by reducing uncertainty for banks, by timizing rules. we've done it by reducing uncertainty for small businesses by encouraging lending. urn certain -- uncertainty around effects of the sequester is no doubt already chilling the economy, and confusion over the continuance of quantitative easing also creates uncertainty. for example, when word spread on wall street that the federal open market committee was considering ending or altery
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qe3, the dow jones dropped significantly. we cannot throw more uncertainty into such a fragile economy and have consumer confidence erode. many of my friends across the aisle will argue that current fiscal policy is costing the economy to overheat. at the same time, all of us are concerned about still too high unemployment. how can a so-called overheating economy see employment grow so slowly, and, furthermore, chairman bernanke, i'd like to ask you, do you think our economy is, indeed, overheating, and can you give us a sense of where the economy would be had you not implemented quantitative easing? also, discuss with us the impact of a sudden fiscal contraction on economic uncertainty and the
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untimely and the ultimately -- tell us about the recovery that you foresee. >> well, i don't think the economy's overheating. there still seems to be quite a bit of up used resources. a lot of people out of work who could be working, capital that could be used is not being used, so, again, i don't see any overheating. we believe that the monetary policies that we've conducted have helped get stronger recovery and more jobs than we otherwiss would have had. there's been different studies that give different numbers, but most find a significant effect. the -- on the fiscal side, as i mentioned, the cbo attributes to the sequester about six-tenths of a percentage point of growth in 2013 which they connect to the full-time equivalent of
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about 750,000 jobs so from the cbo's perspective, there's an important job component or job effect rising from fiscal contraction which, again, as i said many times, the federal reserve really can't overcome. we don't have tools sufficiently powerful to overcome the impacts of those types of fiscal actions. >> do you believe that the sequester kicking in on friday? dennis: we're going to go ahead and leave that. that was a long question, i think, it was, and ben bernanke says he doesn't think the economy is overheating to kind of blinding glimpse of the obvious you get from the hearing. we'll go to break. we'll be back. dow up 109, back over 14,000. tracy: they need a spokesperson. they ask the same questions over and over again because they don't listen to each other. it's like dinner at any house.
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dennis: doing the tease? taking on viacom and the take is how much you pay for cable. that's in the new jersey minute. tracy: gambling coming to the garden state. you won't believe the tax on it though. how the world corp sighs fare against the -- currencies faring against the midst of our chairman being grilled. we'll be back. ♪
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tracy: breaking news out of the apple event, adam, out in california, hey, adam. >> that's right. tim addressing the shareholders and the issue over the $137 billion cash in the bank and preferred shares this david wants the preferred shares, and the board had it to pull or withdrawal the issue to let shareholders vote on. that's coming back to life. tim cook said, and this is paraphrasing, this is the time of the meeting when i would have introduced item two, the item on preferred shares, but we have had to withdrawal it. we're committed to letting our shareholders vote on this proposal. what he's essentially saying is
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not today, but, eventually, and the court didn't take issue with the proposal itself, but the way it was bundled being a part of several issues that apple presented as amendments to the charter. this issue over preferred shares is not going away any time soon, and tim reiterated the board of directors' commitment to let shareholders vote on whether or not in the future the board would have to get shareholder approve to issue preferred shares. tracy? tracy: keep us posted on anything you hear. adam out in california. dennis: and in today's media minute, imagine a day to order cable channels alacarte and pay for what you pick. shining light in the oprah network in light of espn. that could be closer with the antitrust lawsuit that cablevision filed against mtv owner, viacom sparks ground. it got atta boys from charter communications in supporting it, never mind previous complaints
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about bundling popular channels that lost in court, and nevermind the practice has been going on for decades in the business, and cablevision itself was guilty of it. meanwhile, a hundred years ago, the blues singer walter furry louis coined the phrase, "i've been down so long looks like up to me," describing sales in the music industry. they lost last -- rose last year for the first time since 1999. one-third of the sales were digital downloads. in the u.s.? more than half. tracy? tracy: huh. tell you what, my kids don't know what a cd looks like. dennis: i know. tracy: crazy; right? ben bernanke grilled by the house financial committee. we brought you congressman michele bachmann's questions minutes ago, and we'll continue to bring you any headlines from the ben bernanke testimony as we get them. dennis: dow up 120 now, well over 14,000. let's look at winners on the
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s&p. ♪
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this, let's go to california, adam shapiro. rich: discussion is on the discussion they passed before, working conditions in factories in china, and the board of directors and management and shareholders. the issue a moment ago that tim cook brought up, what to do with $137 billion in cash that apple
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has on hand and mr. cook said he was disappointed with a court ruling in favor of david einhorn, mr. einhorn winning for the time being removal of the proposal to the shareholder, the board of directors going to put to a vote whether in the future the board never wanted to issue preferred shares that would let the shareholders make the ultimate decision to give them the vote, but the issue is removed but tim cook said and this was paraphrasing this is a time in the meeting i would have introduced item 2, we are committed to letting our shareholders vote on this proposal which in plain english mean this thing is not going away, it will come back as the board of directors tries to protect that $37 million, we spoke with a shareholder inside the meeting this says it is a good idea for the board to avoid issuing preferred shares and here is why he thinks that. >> apple wants to do whatever is necessary and they like having that cash and many years past,
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apple was in the situation he could use that cash and they are a little gun shy about not having cash. >> as the shareholder meeting continues, al gore who was on the board of directors obviously at the meeting, said that al gore should not be reelected to the board because he sells current tv to al-jazeera. more coming out of this meeting. tracy: keep us posted. dennis: the bottom of the our time for stocks now, nicole petallides at the nyse-listed look at location location location. >> we looking at target and j.c. penney. let's look at how target is tearing down 1%. their forecast is good news, forecasting higher profit. that is good news, predicting a better year ahead.
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with a solid year ahead that doesn't erase what they saw over the holiday season, highly promotional environment and discounting and certain consumers and that obviously ways. kc pending down 2%, also continuing to battle without for historic product with macy's so that was one to watch throughout the week. the last 52 weeks over one year down 52%. tracy: the dow up well over -- 38 points over 14,000. the dow is up 140 points. ben bernanke defending the fed and policies throughout financial services committee central bank has held main streets in many ways. >> people are able to buy houses at low mortgage rates or refinance at lower mortgage rates, people are able to get car loans at lower rates, their house values have gone up so
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that they feel more financially secure so in a lot of dimensions it benefited main street and that was the objective. tracy: imperial wealth management president, scott martin, united advisor strategists, and i know that you think, nothing to help this economy. what is it? a sense of comfort? >> you could call a lot of things. the market and economy are not dancing together. they don't dance together but on the same dance floor. the economy won't tank without the market following suit. if you look at the economic data, gdp alone, zero.1%, there is no way the q e program is creating economic growth or jobs. small business people have not been affected by the move to the fed. what happened is they have
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smashed the bond market as far as rates, killed a bank model and made people go to stocks to look for return which is why the market has been a. tracy: bifurcation between main street and wall street is getting bigger by the day. wall street is on fire, bank's stock with cash and main street still struggling between regulations down the pike and tough to get a loan, how is this helping the economy? >> it is not helping the economy but causing a false sense of security. in the markets and investors and clients alike should be cautiously optimistic for the short term. long term more bullish but as long as the fed's continued to print money and buy back security and easy money, everything is smooth sailing. we have a lot of turbulence on the horizon and people should be very aware of the turbulence
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when those air pockets hit and drop and have to have money on the sidelines to go into the market. my clients are being crushed by the bond income in the interest rates. >> seniors, we're all getting crushed right now. what else worries you about this market? europe is back on the table, does that? up at night? >> throw europe in there as well and including a young daughters. here is the thing, volatility is back in the market and that is a concern. investors have to be ready to put money to work in these markets because there is going to be opportunity but these debates with ben bernanke involved and sequestration and they're being idiots over there creating what is a lindsay lohan market, good day, bad day. and where the opportunities are,
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and we buy and sell. tracy: the merkle reelection as well. bond markets, where do you direct your clients? >> we invest long term in the market in 34 different countries, and the portfolio, to the value sector, and the large value, specific investments and 5% in the portfolio and at&t, and it is a global way. and it was always on the rise, and ge, like to that as well, a global plan and more financial. and the drinks in the portfolio, when the markets have the volatility in the market, the
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long term. tracy: thank you for your insights. and that is keeping you up at night too. >> breaking news out of the apple shareholder meeting in -- adam shapiro. >> tim cook addressing question and answer with shareholders and brought the issue, what is on your mind, the stock price and where it is now and the direct quote, and the board doesn't like to be there and he is focusing on the board is focused on long-term making the fed products and if we get that right, and a hint we have great stuff coming. apple's stock falling in the last 52 weeks 42% from a high of $705 from a low of $432 rebounding a bit. addressing the stock issue, he doesn't like it and the board
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doesn't like it. >> senator kay bailey hutchison had a choice word for washington. she is the next. tracy: let's look at the ten year treasury, basically unchanged. it is 120%. dad, i'd put that down ah.
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shibani: i am shibani joshi with your fox business brief, the annual shareholder meeting is underway, tech giant headquarters in california, and shareholders, focused on the long term and making it the very best product. and he doesn't like the board, and the board doesn't like it either. cote shares jumping on news of a buyout following the report from merger market indicating the company is exploring, the luxury leather goods company telling fox business, and rumors of speculation. reuters reporting $360 million bid by flower foods by bread brands have gone and contested the. and giving us a no comment by fox business. that is the latest from the fox
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tracy: two democratic lawmakers plan to introduce legislation later this week, to create a tax on wall street trading, not the proposal from tom harkin of iowa. and it targets certain trading complex investments. texas republican senator kay bailey hutcheson says to get our fiscal house in order we have to deal with entitlements. she joins us now, do you want to comment on this notion of taxing trades on wall street? >> is dead on arrival. there is no way republicans are going to buy, people are trying to invest in the market and create jobs, just seems like a new proposal every week for taxing people who would be the
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job creators and investors in the country and it is not going to fly. tracy: and intended consequences will fall on 401(k) holders, and get hurt at the end. this is something near and dear to you and we're not hearing any talk about this at all. i see you in a few interviews lately. it kind of gets pushed to the side. why is that? >> glad you brought it up because i agree with you. i am stunned that people are wringing their hands about a 2% cut in the budget of the united states which is the wrong approach. we need to be looking at the long-term and we know that entitlement spending is about 60% of the spending today and it is going to be going up to 70%, and 80% in the near future and if we don't do something to
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stabilize medicare and social security and medicaid, but make sure it is fair for the future we are not going to get anywhere in getting our fiscal house in order, thank you for bringing it up. tracy: let's talk about this a little more. we have a lot of fear tactics coming out of washington. more line that the psa, less border patrol, things like that instead of the crux of the issue here. why is that happening? you were in the senate for 20 years. why are you doing this? >> i think the president is trying to put political pressure on the people who are trying to say wait a minute, we need to sit down and make these cuts strategically. i think the pressure is coming from the scare tactics that we are going to cut t s agents or border patrol agents or the fbi. that is not what you have to cut. anybody who has been in a small business or household knows that you can choose carefully where
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you cut at the very margins, 2.5% and you don't cut the essentials things. you cut the travel budgets, non-essential travel, outside consultants. 2% we are talking. not something major. when you really need to be worrying about actual effect is march 27th when continuing resolution runs out. that is what we ought to be focused on and we ought to be focused on entitlement reform between now and that date. simple things like raising the retirement age. tracy: could make a world of defense difference, defense spending as well. where the set as far as that argument goes? >> defense spending should not be a priority in cutting, the way sequester works, they cut 2%, would be in defense. in that you are just going to look at protecting people in the
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field, not cut military salaries of course, trying to cut the areas that will not affect capabilities and i don't think the scare tactic of not sending an aircraft carrier to the middle east is what we ought to be talking about. we ought to be talking about bases where they are not doing trading that has to be done right now, foreign bases not in the areas where we have military conflict. judgment has to be used. [talking over each other] tracy: thank you. dennis: the house always wins and the state always -- and new jersey hopes to make big bucks. tracy: look at today's winners and losers, dollar stores of
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12%. tracy: right back.
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dennis: the robb report taking its car of the year. i spoke exclusively with robb report senior vice president group publisher david arnold about how it went about choosing the big winner. >> we had one hundred people drive 13 cars in the contest, the year back-to-back was an exhausting day even though you might not understand how exhausting it can be, they drove at $2 million, they drove a ferrari at $400,000.13 cars they
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drove they take the new porsche 911. dennis: a $2 million car came in second. how much does this cost are at? >> $98,000 is the base. dennis: exceed the $200 million car. >> you to get 25 of these instead of one. dennis: no car anywhere should cost $2 million. how fast can this baby go? how fast can you get the test drive? >> 12530 miles an hour. that was just in the parking lot. the top speed is not a question with 188. here are 188 miles an hour. dennis: the basic guide that would buy this car, real insecurity and self confidence problems. >> this car has no insecurity problems. dennis: very good. what about a drawback to the fact this is a tiny car that katie would fit into? >> you could fit in easily and comfortably. take a look. i'm 6 foot 1 in my bare feet and heavier than i want to be so let's see what the legroom is
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inside. oh my gosh. i can actually recline at stake a napa. nicely done. tell us more about this car. what do you think of this use of 9/11 in the title? kind of 1963. is that a drawback? >> it has been around 50 years, such an iconic vehicle, 9/11, the cross reference i don't think is on anyone's mind. people who were really passionate, and people were collecting these. dennis: see how proud i feel. if i did on this car, i would not offer the first ride in it. this car has been around 50 years but had a major redesign only this year. >> this is what you are sitting in. it is lighter and more compact than using aluminum and manufacturing that result in more e efficiency, better miles to the gallon which is import even for someone spending $100,000 on a vehicle when gas
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prices are but it is an absolute joy to drive and anyone who got out of the vehicle, car of the year event, had a huge grip on this. dennis: this nice yellow trim on the shift, had the yellow trim and yellow seatbelts which kind of alarming, this particular model costs how much? it must be fully loaded. >> it comes out somewhere around 110, 19 or something. almost an ultimate or intimate customization that you can put into it. dennis: in a very digital car, you actually got an analog clock with the seconds we going around which is a nice antiquated touch. why do that? >> that is another feature that has changed. what has changed dramatically is the interior. the interior of this vehicle had been >> reporter: in 20 years or so. this is a complete refresh, the
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technology -- and the car they launched a couple years ago. and the instrumentations. and through a variety of things. dennis: in 30 years in new york, it was a decade ago. >> through porsche lovers don't want that car on the road. dennis: in manhattan traffic the drive was pretty great. tracy: another reason i loved new jersey, jersey now the biggest state, and get allowing gambling. and they run websites, and poker and blackjack, now you have to be in new jersey to play them and of course a tax on online gambling with a whopping 15%.
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we need the money. but you know what? there are going to be a lot of people coming to jersey just to gamble. dennis: apple shareholders on the attack. tracy: tim cook says not happy with the share price either. dennis: melissa and more with the latest from the apple shareholders conference.
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